Germany’s Green Energy Fiasco: ‘One Of The Most Monumental Blunders Of Modern Governance’

  • Date: 14/04/16
  • Editorial, The Wall Street Journal

Berlin’s renewable energy fiasco is about to get even worse

Germany has spent some €200 billion ($228.09 billion) since 2000 transforming its energy industry into a green dream, and now Berlin wants to spend more. Witness its latest attempt to discourage investment in wind power, which happens to be the only renewable energy generation that makes even vague sense for Germany.

A review now under way of the 2014 renewable-energy law could change the way Berlin chooses new generating capacity. The current system of subsidies and feed-in tariffs (requirements that utilities buy renewable electricity at above-market prices) has led to a bonanza of solar- and wind-farm construction, and renewables now provide one-third of electricity generated in Germany.

The renewables never seem to fall in price the way boosters promise, and with costs skyrocketing Berlin needs a cheaper way to boost renewable capacity to its self-imposed goal of 45% of electricity generation by 2025.

The proposed solution is a bidding system in which renewable producers would compete for the right to produce a share of the planned new green capacity based on who can offer the lowest price. An auction process is supposed to make green energy more affordable. But Berlin wants to exclude new wind producers from this auction, at least as long as other producers such as solar are available. This despite—or perhaps because of—the fact that wind is the cheapest form of green power in Germany.

It makes you wonder if there’s any form of energy-price signal that governments won’t ignore. Germany’s 16-year-old Energiewende, or energy transformation, already has wrecked the country’s energy market in its quest to wean the economy off fossil fuels and nuclear power. Traditional power plants, including those that burn cleaner gas, have been closing left and right while soaring electricity prices push industries overseas and bankrupt households. Job losses run to the tens of thousands.

Now the effort to suppress additional wind-power development threatens to make matters worse. By favoring solar, Berlin would be picking the power source that most exacerbates the problems with the energy transformation. It’s the most expensive, requiring the greatest subsidies—at least €116 billion in today’s prices over the lifetime of the solar capacity built between 2000 and 2014. Germany has a climate and geography with about as much sunshine as Alaska, so solar is also the least reliable renewable.

The market distortions caused by overreliance on expensive but undependable power already have pushed German utilities to rely more on cheap and dirty coal-fired power plants to make up the shortfall when renewable sources can’t meet demand.

There are no heros here, least of all the wind industry currently bemoaning its bad political luck at potentially missing the subsidy- and feed-in tariff boat. Even if Berlin allows wind generators to bid for their share of new capacity, taxpayers and power consumers still will be on the hook for major new expenses. One problem with wind, which helps explain why it’s falling out of favor, is that someone would need to build expensive and unsightly new transmission lines from the windy north of Germany to the industrial south.

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